Toys loaded with the latest machine-learning capabilities undoubtedly made it onto 2015 holiday wish lists. Offerings like Hello Barbie, CogniToys Dino, and Miposaur provide an opportunity to reflect on recent advances in artificial intelligence (AI)—as well as a few challenges.

What three trends do these AI-empowered toys showcase?

1. Advances in Natural Language Processing and Gesture Recognition

Most of us are familiar with natural language processing and voice recognition from our interactions with technologies like Siri. Now AI is being used to reinvent how children interact and communicate with toys.

Take Hello Barbie, a doll that converses, jokes, and plays games. The doll is equipped with a microphone that records and transmits speech from the child, back through Barbie’s wi-fi enabled accessories, to ToyTalk servers. Voice-recognition tools analyze the child’s comments and, from a set of 8,000 lines of prerecorded content select how to respond or initiate conversation. All this occurs in less than one second.

Or consider Miposaur, a toy dinosaur on wheels that moves in response to hand gestures—a feature that may forecast gesture-activated electronics like car ignitions, door locks, alarm clocks, or stoves.

Advances in these areas will continue to transform how people interact with machines, creating more natural and effortless communications that are aligned with how we live our daily lives.

2. Advances in Personalization

Consumers are growing more and more familiar with personalized suggestions and interactions through the use of tools like Neflix’s and Amazon’s recommender engines. We are emerging into an era where products and services, from medical care to consumer products, will be designed and customized to our own unique needs and preferences.

We see these advances reflected in this year’s selection of toys. Although Hello Barbie has limited prerecorded content, it will nonetheless “remember” things about the child in order to customize interactions. For example, if a child tells Hello Barbie that she is an only child, Barbie will no longer ask her about siblings.  

Offering even greater personalization is the CogniToys Dino. In addition to remembering a child’s previous interactions, the Dino connects to the cognitive system IBM Watson, allowing children to receive direct responses in real time. If a child tells the Dino that she loves space, the Dino will “push” interesting information in this area.

3. Privacy and Security Challenges

It is becoming increasingly clear, however, that these AI advances come with privacy challenges.

As adults, we are familiar with advertising practices that feed off of our search histories—after researching a gadget online, we may not be surprised by a pop-up ad offering a discount on that gadget. But what if a coupon for a toy arrives in your inbox, or on your doorstep, based on a conversation that your daughter just had with her Hello Barbie?

ToyTalk, Mattel’s partner in creating Hello Barbie, will capture, store, and analyze children’s conversations with the doll—to generate responses, of course, but also for their own research and development purposes. 

In addition, Hello Barbie features a Parent Portal that caregivers can use to listen in on the conversations that their children have with Barbie. Parents will also be able to share the video or audio files on social media—which has its own privacy risks. “Our social data is as unique as our DNA, except that there aren’t any strong guidelines on when, how, or who uses it,” says Adam Pah, a clinical associate professor of management and organizations at the Kellogg School and associate director of the Northwestern Institute on Complex Systems (NICO).

Concern over Hello Barbie’s intrusiveness is such that a group has already formed to warn parents of the dangers of the doll, and Campaign for a Commercial-Free Childhood has started a campaign to get it taken off the shelf.

There is also the risk that control over the data will leak beyond the companies currently responsible for that data’s safekeeping. Already, a group of lawyers have established a website and toll-free number for anyone who thinks that their Barbie has been hacked. Anyone who thinks these concerns are overblown should remember the November 2015 hacking of the electronic toymaker VTech—during which profiles, pictures, and audio files from more than 6 million children were exposed.

As artificially intelligent products march from the design lab to the playroom (and indeed every room), they bring with them associated security challenges that need to be carefully identified and addressed.

How long before Santa starts recruiting data scientists and cyber security consultants to his team?